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Costco

Wal-Mart isn't the biggest in every business. Costco Wholesale is the largest wholesale club operator in the US (ahead of Wal-Mart's SAM'S CLUB). The company operates about 535 membership warehouse stores serving more than 50 million cardholders in 40 US states and Puerto Rico, Canada, Japan, Mexico, South Korea, Taiwan, and the UK, primarily under the Costco Wholesale name. Stores offer discount prices on an average of about 4,000 products (many in bulk packaging), ranging from alcoholic beverages and appliances to fresh food, pharmaceuticals, and tires. Certain club memberships also offer products and services such as car and home insurance, mortgage and real estate services, and travel packages.

To shop at Costco customers must be members -- a policy the company believes reinforces customer loyalty and provides a steady source of fee revenue. Three types of annual memberships are available: Business ($50 each), Gold Star ($50; for individuals and their spouses), and Executive ($100; allows members to purchase products and services, including insurance, mortgage services, and long-distance phone service, at reduced rates). Costco's card membership renewal rate is 87%.

Facing competition from discounters, including Target, that don't charge a membership fee, as well as from rival SAM'S CLUB, Costco is expanding and retrofitting its warehouses (which average about 140,000 square feet) to accommodate fresh food sections and other ancillary units, such as gas stations, optical departments, pharmacies, and food courts. Costco's foray into grocery sales has been a success. Food and sundries accounted for more than half of Costco's total sales in 2007, making it the third-largest seller of groceries in the US behind Wal-Mart Supercenters and Kroger. Costco is expanding its premium private-label Kirkland Signature line of some 330 items (about 15% of sales) to 500 products by 2011. (It has even struck a deal with Martha Stewart Living Omnimedia for a new line of...